HOW MUCH DO I NEED?
It is considered you should have at least $200,000 in assets to commence your own SMSF. This is because the costs of running your own SMSF will generally be $2,000-$2,500 a year which is 1-1.25% of the funds’ assets and comparable to the fees charged by industry funds and lower than the charges of retail funds. As the assets of the fund increase, the costs as a percentage get lower, and prove to be very cost effective for high fund balances. So a fund balance of around $200,000 is a cost effective starting level.
Keep in mind a SMSF can have up to 4 members (although most tend to be husband and wife funds) and so the asset balances mentioned above are for the combined balances of each member of the fund. There are proposals before parliament to increase the limit to 6 members.
WHAT SKILLS DO I NEED?
Trustees are legally responsible for all decisions made in relation to running the fund and ensuring all administrative obligations including the annual audit are completed. For that reason it is important for you to have the time and to be prepared to learn about running your fund and to ensure you comply with superannuation law. Experience shows that people in their own business and professionals generally have the capability and desire to being hands on and motivated to control the funding of their future retirement.
FOLLOWING THE RULES IS IMPERATIVE
A SMSF provides many benefits in the right circumstances. However, SMSF’s are highly regulated and an independent audit is required by the fund each year to ensure compliance with superannuation law. Material breaches of the rules must be reported to the ATO and penalties on trustees for non-compliance can be very harsh. For this reason only persons who are willing to follow the rules should consider a SMSF.
For a thorough explanation of the rules that trustees must follow, contact our office or look under Self-Managed Superannuation on the Australia Tax Office website.